2025 (3) TMI 87 - AT - Income Tax

Validity of assessment order passed u/s 153A w/o valid approval granted u/s 153D - HELD THAT - As relying on Shiv Kumar Nayyar 2024 (6) TMI 29 - DELHI HIGH COURT and also in the case of Serajjudin Co. 2023 (3) TMI 785 - ORISSA HIGH COURT the approval granted in this case is without application of mind and consequently the assessment order is annulled. The ground of appeal .of the assessee is allowed.

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment revolve around the validity of the assessment order passed under section 153A read with section 143(3) of the Income Tax Act, particularly focusing on the approval granted under section 153D. The issues include:

Whether the assessment order was invalid due to the absence of a valid Document Identification Number (DIN).
Whether the search that led to the assessment was unlawful, thereby invalidating the assessment order.
Whether the assessment order was invalid due to the absence of incriminating material found during the search.
Whether the approval granted under section 153D was mechanical and lacked application of mind, rendering the assessment order invalid.
Whether the additions made by the Assessing Officer (AO) regarding unaccounted sales, undisclosed investments, and income declared under the Income Declaration Scheme were justified.

ISSUE-WISE DETAILED ANALYSIS

Approval under Section 153D

Legal Framework and Precedents: Section 153D mandates prior approval from the Joint Commissioner for assessments under section 153A. The approval must reflect an application of mind to the material on record for each assessment year. Precedents, such as the cases of Shiv Kumar Nayyar and Serajuddin & Co., emphasize that approval cannot be a mere formality.
Court's Interpretation and Reasoning: The Tribunal found that the approval was granted mechanically. The JCIT approved the assessment for 21 different assessment years in a single day, which was deemed humanly impossible. The Tribunal noted that the JCIT did not have sufficient time to apply his mind to the draft assessment orders and related materials.
Key Evidence and Findings: The affidavits from the AO and JCIT claimed discussions were held before granting approval. However, the Tribunal found these claims insufficient to prove that the approval was not mechanical.
Application of Law to Facts: The Tribunal applied the principles from relevant case law, concluding that the approval process was flawed due to the lack of independent application of mind.
Treatment of Competing Arguments: The Revenue argued that discussions and reviews took place before approval. The Tribunal, however, prioritized the documented timeline and volume of cases, which indicated a lack of thorough review.
Conclusions: The Tribunal annulled the assessment order due to the invalid approval process under section 153D.

Other Grounds of Appeal

The Tribunal did not adjudicate on other grounds related to the legality of the search, incriminating materials, and specific additions made by the AO, as these became academic following the decision on the approval issue.

SIGNIFICANT HOLDINGS

The Tribunal emphasized the necessity of a genuine application of mind in granting approvals under section 153D, rejecting any mechanical or ritualistic approach.
The decision reinforced the principle that procedural requirements, such as obtaining valid approvals, are critical to the integrity of the assessment process.
The Tribunal concluded that the assessment order was invalid due to the flawed approval process, setting aside the order and allowing the appeal.

The Tribunal's decision underscores the importance of adherence to statutory requirements in tax assessments, particularly the need for a considered and deliberate approval process under section 153D. This judgment aligns with established judicial precedents, reinforcing the principle that procedural lapses, especially those indicating a lack of due diligence, can invalidate an assessment order. The appeal was allowed, and the assessment order was annulled based on the invalid approval process.

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